Redefining Urban Spaces: The Growth of Mixed-Use Innovation Districts
The Synergy of Mixed-Use Spaces: Housing, Offices, and Retail in Innovation Districts
Dear Readers,
A huge welcome to all the new subscribers that have recently joined.
I would like to share some news.
From this week you will also be able to purchase a subscription to support my work to show it’s valuable to you.
My weekly posts and newsletter archive will remain free for everyone.
In the future, I will introduce some extra products exclusive to paid subscribers.
More details in the coming weeks.
Best,
Carlo
This week’s newsletter explores Innovation Districts, examining the challenges and opportunities for investors.
Innovation Districts aim to create ecosystems that foster innovation. Proximity to main anchor institutions like universities, hospitals, or research centres is essential to attract talent and drive R&D activities.
Innovation Districts thrive when these three elements collide:
Networking Assets ⇒ relationship between individual companies.
Economic Assets ⇒ the companies within the district.
Physical Assets ⇒ the real estate allowing the companies to interact.
Previously, these areas were associated with large business parks on city peripheries. Now, they are moving into urban centers, with examples in Boston, Milan, London, and Barcelona.
Driven by broad economic and demographic trends, cities around the world are witnessing the emergence of innovation districts. - The Global Institute on Innovation Districts
Over the past two years, I have worked on the Masterplan Development for MIND (Milano Innovation District).
I had the honour of leading the first phase of mixed-use development called West Gate, covering approximately 145,000 sqm with offices, labs, residential build-to-rent units, retail, and hotels.
MIND has four institutions and one networking asset anchoring the District:
Galeazzi Hospital.
University of Milan.
Fondazione Triulza.
Human Technopole.
Federated Innovation (virtual networking asset).
BUSINESS NETWORKING ENGINE DESIGNED TO ACCELERATE THE INNOVATION CREATION PROCESS WITHIN THE MIND ECOSYSTEM - Federated Innovation
Here’s what we will cover in this newsletter:
Creating Vibrant Destinations: The Role of Mixed-Use Development in Innovation Districts
Harnessing Public-Private Partnerships for Successful Innovation Districts
The Evolution of Office Spaces in Innovation Districts
Innovation Districts: Trends, Challenges, and Opportunities in Real Estate
Investment Strategies: Lessons from Leading Innovation Districts
Now, let's dive in.
1. Creating Vibrant Destinations: The Role of Mixed-Use Development in Innovation Districts
Innovation districts promote creativity, collaboration and innovation. They bring together diverse groups of people and organisations. A mixed-use development strategy is fundamental for this collision to take place.
The mix of uses helps to create a district that functions on a 24/7 basis and not a place where people go to only to work.
The MIND Masterplan names the ground level “Common Ground.” Every building’s ground floor is open for public passage, fostering serendipitous encounters.
Another example of successful mixed-use adoption is the City of London. Previously a 9-to-5 office district, it was deserted on weekends and evenings. Today, it’s a 24/7 district with major retail areas, bars, and restaurants, attracting tourists throughout the week.
2. Harnessing Public-Private Partnerships for Successful Innovation Districts
Successful innovation districts utilize Public-Private Partnerships (PPP). This approach helps manage extensive land areas and long development timelines. Public bodies can attract companies and attention, aiding in ecosystem creation.
Barcelona’s innovation district, 22@Barcelona, was established as a PPP to regenerate 200 hectares of former industrial land. This partnership also supports initiatives like Urban Sustainability Exchange and Barcelona Global, providing strong leadership and access to funding.
MIND (Milan Innovation District) is a PPP between Arexpo (owner of the Freehold) and Lendlease. LendLease is the private partner who owns the development rights on c.500,000 sqm of land in the district.
3. The Evolution of Office Spaces in Innovation Districts
Offices are a critical Asset class within these districts. They allow the economic and networking assets to collide to innovate.
Offices in these precincts are also attractive investment opportunities. They can generate 20-25% IRRs when developed within a brownfield urban regeneration project.
Workspaces in innovation districts can include:
Conventional Office = > traditional lease model.
Flexible Office space = > management agreement with an Operator.
Lab Offices = > can be either traditional or leased to an Operator.
Maker Spaces = > shorter leases.
The first office spaces on the market at MIND were refurbished Expo pavilions, offering quick turn-key space to local companies. New office buildings include approximately 10-15% flexible office space on lower levels, allowing tenants to start with smaller footprints and grow within the building.
4. Innovation Districts: Trends, Challenges, and Opportunities in Real Estate
Innovation districts are crucial in modern urban development, bringing economic and social benefits. They prioritize people, places, and partnerships, fostering inclusive environments and dynamic urban spaces, enhancing city productivity and attracting real estate development.
A key reason behind the growth in support for Innovation Districts is their ability to attract skilled talent. This in turn activates the local economy. A great opportunity to revitalise central urban locations.
This urbanization model has challenges, such as:
Difficulty in attracting tenants = > particularly an issue when dealing with off-centre locations.
Long Development Timeline = > For developers and investors this is a long-time commitment.
Many stakeholders = > Stakeholders from different sectors and backgrounds.
MIND encompasses these characteristics. It’s a 10+ year regeneration project in a new part of the city. New tenants move in to work in innovation or be close to main anchors.
Oslo Science City is a successful innovation district, home to over 300 startups and aspiring to be the greenest district in the world.
5. Investment Strategies: Lessons from Leading Innovation Districts
Investing in innovation districts requires expertise, patience, and an understanding of ecosystem creation, along with good political connections and stakeholder management. Thus it’s important to gain a deep understanding of critical factors before starting this type of project.
Key factors to consider when investing in and Developing Innovation Districts are:
Clustering and Research Strengths: focus on the concentration of innovative sectors and leverage the strengths of the local region.
Diversity of Institutions, Companies and Start-ups: this will help foster accelerated innovative growth.
Connectivity and Proximity: promote a car-free neighbourhood, and favour locations near transport nodes.
Programming and Social Interactions: Prioritise programming activities to grow skills, strengthen firms, and build networks.
Visibility and Public Engagement: Make innovation visible and public through events and activities.
Collaborative Governance: Put in place a collaborative approach amongst all stakeholders. Federated Innovation at MIND is a good example of this.
Public Private Partnerships: leverage local and national government to streamline land provisioning, regulation approvals and attract institutions.
Conclusion
Innovation districts can be seen as cities of the future. Their success depends on many factors. Understanding sound real estate development principles is only a small part; creating the ecosystem requires multifaceted expertise.
Key takeaways for innovation districts include:
It’s a long development play.
New Build Office IRR 20%++.
The importance of Public-Private Partnerships.
Mixed-use is paramount to achieve a vibrant neighbourhood.
Real estate alone is not enough; building the ecosystem of companies and people is essential.
That’s all for today.
See you next week.
Book a Free Discovery Call
To find out more about how I can help you enhance your development project you can book a free discovery call with me by clicking the button below.
Subscribe to the Newsletter
A newsletter by Carlo Benigni providing, in less than 4 minutes, exclusive advice, strategies, and resources to help unlock hidden real estate value.
Subscribe for free to receive new posts and support my work.